Let’s talk about winning at auction. Look, I know auctions can be intimidating, but with the right strategy, you can come out on top and nab your dream property. But you can’t expect to just walk into an auction and buy a property at a bargain price – here’s a few tips to help you on your way. .
Do your research! Don't go into the auction blind. Like anything in life, failing to prepare is preparing to fail! Now I’m not just talking about looking up the property, the neighbourhood, and similar sales in the area on realestate.com. All these are important but to win, you need to do more! You need to know what you're getting into. You need to understand the mechanics of an auction and how auctioneers work.
So how do you get an understanding the mechanics of an auction?? Simple, attend as many as possible. These days auctions are both in person and online, so actually attending an auction is quite easy. Jump onto Facebook or YouTube and watch different auctioneers at work. Find out who the auctioneer will be for the property you are hoping to nab and attend auctions of other properties they are conducting. Observe other bidders and see how they act and react during the bidding process.
Real Estate agents and auctioneers generally work to a pattern, a formula or method that they have used countless times that gets the desired result for them. Understanding how the agent and auctioneer operates will provide a bit of predictability and, may give you an advantage when it comes to bidding time. This is where a buyers agent can definitely add value.
No matter how many auctions you have been to, you are bound to get a bit nervous. After all, you are about to spend a considerable amount of money. Being familiar with the process and the environment can reduce the amount of panic and anxiety.
Set a budget and stick to it. It is easy to get carried away in the heat of the moment. Auctions are mostly out of your control, so make sure you control the things you can.
You need to know what price you are willing to go to in order to purchase the property, what bid you will put forward if nothing happens and a plan of how you are going to bid.
It is good idea to set three limits:
1. Bargain Price
2. Fair Price
3. Stretch Price (absolute maximum)
Write them down and stick to it! Commit to an absolute top end and be prepared to walk away if the bidding goes over your stretch price. In the heat of the moment, it’s easy to get carried away, and before you know it you are $1,000, $5,000, $10,000 above your maximum. Remember a successful bid is only a win if it's within your means.
Plan for scenarios
Auctions generally run to certain patterns, and while you have very little control over how they will go, you can be prepared for different scenarios that may play out.
Before you get to auction day, have a plan in place for the following scenarios:
1. No-one makes an opening bid
2. Bids are coming slowly, but the property is not on the market
3. Bids are coming think and fast from multiple parties
4. Your stretch price budget is blown out of the water in the first couple of bids
Have a clear understanding of how you are going to react/bid in each scenario. On auction day you will be prepared and ready to act no matter what happens, not left standing around wondering when the hammer falls.
There are varying opinions on where to stand during an auction for best effect. Some say standing at the front is key, while others prefer to be at the back or side. At the end of the day, it doesn’t really matter as long as you are visible.
Make sure the auctioneer can see, hear, and interact with you. You don’t need to be right up in their face, just ensure you have a clear line of sight. There’s really no point in hiding behind a corner or tree, it just makes it more difficult for you to place your bid.
It’s also a good idea to introduce yourself to the auctioneer prior to the start of the auction. Build some rapport and create a connection. At the end of the day it won’t mean the auctioneer will be biased towards you, but at least it builds some familiarity and the auctioneer will be able to eyeball you in the crowd.
Don’t try too hard
Auctioneers conduct auctions week in week out, so they come across a wide variety of bidding and negotiating styles. You don’t need to be the gun negotiator to win at auction. You just need to get yourself in the best position to buy the property whether it sells at the fall of the hammer or is passed in.
If the auction has stalled or non-one is bidding, it may be the perfect time to make a bid yourself. When the auctioneer is preparing to pass the property in on a vendor bid, if you are not the highest bidder, place a bid equal to or slightly above the vendor’s bid. This will then put you in the best position to negotiate if the property is passed in.
But remember, don’t bid against yourself!
The Vendor’s bid is a price at which the vendor is happy to negotiate but is still below the reserve price. If you are the highest bidder when a property is passed in, you get the exclusive right to negotiate with the vendor. This is exactly where you want to be.
The vendor is primed to sell the property at this point. They have gone through the marketing campaign and they are focused on selling the property on auction day, the perfect time to negotiate as a buyer.
Don’t try to be too clever at this stage, but work within the legislation. There is no set time period for the right to negotiate in the legislation. If it can’t be done on the day, clarify a specific time for the exclusive negotiation period, ask for it to be documented in writing (text message/email). The best time to negotiate the deal is still on the day of auction, when the vendors are ready to move on and there are limited outside factors influencing their decision.
In short, winning at auction requires research, confidence, and a bit of strategy. With these tips in mind, you'll be well on your way to coming out on top at your next auction.
Park Avenue Property Group, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances.